Gold nudges lower as the U.S. dollar extends gains

San Francisco (Jan 8) Gold fell for the second straight day on Thursday, in a choppy session weighed down by a stronger dollar and rising stock markets after being buoyed by expectations the Federal Reserve will be patient in raising interest rates.

Minutes from the Federal Reserve's latest policy meeting released on Wednesday reassured markets that the central bank was in no hurry to raise interest rates, lifting European shares.

Spot gold was down 0.2 percent at $1,208.17 an ounce at 2:35 p.m. EST (1935 GMT). U.S. gold futures for February delivery settled down $2.20 an ounce, or 0.2 percent, at $1,208.50.

"It was a combination of the euro (being) down again, making new lows. That is very negative for gold as well as the strong rally in the equity markets," said James Steel, chief metals analyst for HSBC Securities in New York.

"That has taken away safe haven buying that was going into gold. We had a bit of profit-taking after a strong showing earlier this week."

Among currencies, the dollar hit a 9-year high against the euro, as investors ramped up bets the European Central Bank was getting closer to loosening monetary policy to ward off deflation.

Weakness in the euro lifted gold priced in the single currency 0.8 percent to a new 15-1/2 month high at 1,031.68 euros an ounce.

Earlier support came as the benchmark 10-year U.S. Treasury yield stood flat at 2 percent. As gold pays no interest, low returns from U.S. bonds and other markets is seen as positive for the metal.

Analysts are awaiting the release of U.S. non-farm payrolls data for December on Friday, a key barometer of the health of the U.S. economy. An upbeat report is likely to support the view that the Fed will raise rates sooner rather than later.

"The market is likely to consolidate in the period leading up to U.S. non-farm payrolls on Friday within a $1,200-1,220 range," precious metals house MKS said in a note.

In a reflection of investor sentiment, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, reported another 3-tonne outflow on Wednesday, bringing its holdings to their lowest since late 2008 at 704.83 tonnes.

Among other precious metals, silver was down 1 percent at $16.35 an ounce, while platinum was up 0.2 percent at $1,215.49 an ounce and palladium rose 0.4 percent to $791.50 an ounce.